TMI Blog2018 (12) TMI 474X X X X Extracts X X X X X X X X Extracts X X X X ..... rate supplies and needs to be treated not as composite supplies Medicines supplied to the inpatients - Held that:- They form part of the healthcare services supplied to the concerned patients and hence are part of the composite supplies of health care services where the principal service is “healthcare services” and is exempt from tax vide Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - However supplies of medicines or food and drinks to persons other than patients, like attendants of the patients and when supplied to the patients not as advised by the doctor or nutritionists, then such supplies would not form part of the composite supplies and would attract applicable tax. Medicine supplied to outpatients - Held that:- The doctors prescribe the medicines and the patients, if they are free to purchase the medicines from any pharmacist (need not be from the same hospital), then such purchase of medicines from the pharmacies of the applicant cannot be treated as a part of the composite supplies as they are independent of the healthcare services provided by the applicant. Similar treatment also needs to be provided in case of food and drinks supplied to patients - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST Act, 2017 read with Rule 104 of CGST Rules 2017 KGST Rules 2017, in form GST ARA-01 discharging the fee of ₹ 5,000-00 each under the CGST Act and the KGST Act. 2. The Applicant is a private limited company engaged in providing health care services categorizing them as In-patient (IP) and Out-patient (OP) services. The Company is also engaged in supply of medicines (pharmacy) to in-patients and out-patients. It also operates Restaurant / Canteen services in its premises which is used for supplying food and other eatable items to its patients and their attendants. 3. The question on which advance ruling is sought is as follows: (a) Whether two or more supplies of goods or services which are naturally bundled in which principal supply is exempt and others are taxable, can be treated as composite supply and if yes, principal supply being exempt supply, can the said composite supply be treated as exempt supply or the same cannot be treated as composite supply? (b) If not treated as composite supply, is registered person allowed to claim input tax credit of tax paid on procurement of capital goods, inputs and input services related to both taxable supply and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... food are taxable at different rates under GST. f. With these facts, the applicant has sought an advance ruling on the matters already enumerated above. 4.1 The applicant states that as per definition of composite supply , it can be inferred from the word taxable supply included in the definition of composite supply that it covers only such supplies which are subject to GST and not the exempt supplies. Therefore, in the instant case, though two or more supplies are naturally bundled, i.e. healthcare services, being exempt supply, the same cannot be treated as composite supply. 5. Considering the above conjecture, the applicant is discharging GST liability on supply of medicines and food provided to both in-patients and out-patients as a separate line item which are clearly identifiable on the face of the invoice and availing input tax credit on inputs used in providing such supply of medicines. Further, no credit of input tax charged on goods and services used in supplying the food/ any other article for human consumption or drinks is availed pursuant to the Notification No.46/2017-Central Tax (Rate) dated November 14th, 2017. With regard to healthcare services, sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person not to avail the credit of CGST paid on procurement of inputs, input services and capital goods which are attributable to supply of exempted services. 9. Based on the facts above, the applicant requests this Authority to clarify if,- 1) the Healthcare services provided, which is an exempt service along with other taxable supplies to in-patients and out-patients, can be construed as Composite supply? a. If yes, is supply of pharmacy goods, consumables and canteen services forms part of such composite supplies, not liable to tax? b. Valuation of IP pharmacy, if the same is treated as part of composite supply? 2) the said supply cannot be construed as a composite supply, is it correct to discharge GST liability only on supply of medicine, consumables and food that are supplied in conjunction with healthcare services and simultaneously availing input tax credit on GST paid on inputs and input services procured for providing supply of medicines and consumables? 3) the input tax credit of GST paid on inputs, input services and capital goods which are attributable to healthcare services shall need to be reversed as the same are towards exempted servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services or both which is leviable to tax under this Act; Sub-section (47) of section 2 defines an exempt supply as under: (47) exempt supply means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply; Since the healthcare services are exempt from tax under section 11, the same are exempt supplies. But the definition of taxable supplies includes those supplies of goods which are leviable to tax and chosen to be exempted under section 11 and hence the exempt supplies also fall under the category of taxable supplies and hence the supply of goods and services supplied by the applicant company in conjunction with the healthcare services fall under the definition of composite supply as the services of supply of food and medicines to the patients are as advised by the doctor or nutritionists. But in case where the supply of food is not as advised by the doctor or nutritionists and is supplied to the patients, then such supply of food cannot be treated as naturally bundled supplies and supplies ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xed supply means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. Even here, there would not be any question of valuation of supply of medicines or food or drinks as they are supplied at a single price. (c) In case where supplies of medicines, food and drinks and healthcare services are not supplied for a single price and form separate and independent supplies, then such supplies are to be taxed separately at the rates applicable to such supply of goods or services. Here the valuations of the individual supplies are to be valued on the basis of the provisions of section 15 of the CGST Act. 11.5 Sub-section (1) of section 16 of the Central Goods and Services Act 2017 reads as under: (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his busin ..... 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